Companies in Western Europe face a likely funding shortfall of $1.5 trillion
(£900bn) next year as central banks withdraw emergency stimulus, and
spendthrift governments across the world soak up much of the available
capital, according to calculations by Standard & Poor's.

By Ambrose Evans-Pritchard

5:30PM GMT 02 Dec 2009

"This is definitely a threat on the horizon," said Blaise Ganguin, the agency's European credit chief.

Some 75 companies large enough to be rated face likely default in 2010 as the slow-burn effects of the crisis hit home. The default rate peaked near 13pc this year, the highest since S&P began to collect data.

The shortage of funds will raise borrowing costs for business by an extra 75 basis points, with the risk of a more serious crunch for small companies. "While the worst of the recession may be behind us, the recovery is likely to be extremely shallow," he said.

Mr Ganguin said capital spending in vulnerable sectors such as automobiles, home furnishing, and forestry may fall by as much as 50pc as they struggle to cope with excess capacity. "These are enormous numbers. It is clearly going to put a dampener on the recovery," he said.

Mr Ganguin said the severity of problems depends how quickly the Bank of England and the US Federal Reserve step back from quantitative easing. The Anglo-Saxon central banks have between them bought almost $2 trillion of government debt and mortgage bonds. This has propped up the entire global debt market and capped borrowing costs. As the support is withdrawn - and ultimately reversed - bond yields may rise rapidly to uncomfortable levels.

There is no sign yet that governments are about to cut their deficits. State borrowing will continue to rise overall next year, "crowding out" global debt markets.

Commercial banks cannot easily step into the breach because they must raise capital ratios to meet new rules agreed by the G20, forcing them to keep credit tight. "We're firmly negative on European banks. It is going to be a long road for them to clear their damaged loan books," said the agency.

S&P said the greatest worry is the "parlous condition" of the car industry and related suppliers, expecting auto sales to fall by 10pc to 20pc next year as the cash-for-clunkers schemes are shut down. "There are going to be a lot of empty car plants in Europe," it said.

Twelve companies of all kinds are at serious risk of dropping through the floor from investment grade into the junk category of BBB- or below, which can automatically trigger sales by some investors.

Five of these "potential fallen angels" are British: F&C Asset Management, Rentokil, Tate & Lyle, Kingfisher, and Western Power. Four are German, and one is French. There are no Italian or Spanish companies on the danger list.